Thursday 11 October 2012 10.00 EDT
First published on Thursday 11 October 2012 10.00 EDT

This week's announcement that at least 11 European countries will press ahead with a financial transaction tax has barely registered with the UK media, whose gaze was fixed firmly on the BoJo show in Birmingham. But it could prove a significant milestone in the quest for a Robin Hood tax to ensure that banks pay their fair share to repair the damage done by the economic crisis both here and in poor countries.

At a time when George Osborne was insisting on a further £10bn in cuts to the safety nets of the UK poor, the European 11 – which includes the big economies of Germany, France, Italy and Spain – were lining up to give a clear message that it is time finance worked in the interests of society rather than the other way around.

Despite increasingly negative rhetoric, the official position of the prime minister and his chancellor remains that they favour a global FTT but that introducing such a tax without the US would mean the City of London and therefore the UK economy would lose out. This is wrong on a number of counts.

First, a number of the world's leading financial centres already have FTTs. Indeed our very own "stamp duty" on share transactions raises about £3bn a year for the Treasury. Hong Kong – to take another example – already taxes derivative transactions. Neither has forfeited its star status.

More prosaically, the likely design of the European tax means it will be paid by City institutions despite the UK's refusal to sign up. The tax will apply to any transactions on shares, bonds and derivatives where one of the parties to the transaction is based in a country where the tax is introduced. Accountants Ernst & Young estimate that, depending on the final number of countries that sign up, City institutions will still be liable for up to £21bn in tax. But rather than this being paid into our Treasury, it will go instead to governments on the continent.

In an age when austerity is failing to bring the public finances under control it is hard to imagine a more spectacular own goal than imperfectly protecting City fat cats at vast expense to the public purse.

This is a policy that would not only raise billions, but help curb casino capitalism and particularly the computer-driven high-frequency trading that is contributing to worrying instability in world markets. That's why a thousand economists and 50 leading financiers wrote to David Cameron and other world leaders calling for an FTT, and why it is supported by Bill Gates, George Soros and Warren Buffet.

Certainly it offers an opportunity you would expect Labour to enthusiastically seize. There is enormous grassroots support for the Robin Hood tax among the Labour party rank and file, as well as Labour MPs. It is hugely popular with the British public. Yet despite some warm words and a mention in Ed Balls's conference speech, the party's leadership remains little more than a fairweather fan, unwilling to shift its position that an FTT would not work without the US.

For now, the new "one nation" party remains disproportionately wary of a single square mile. But real progress in Europe could be a game changer. Can you imagine the Labour party going into the next election vowing to remain outside a European Robin Hood tax that has elsewhere reined in the markets and raised billions to kickstart economic progress? The two Eds need to live up to their admirable rhetoric on responsible capitalism and back a Robin Hood tax.

And never mind Labour, if Europe gets its FTT right, this government will find it increasingly difficult to justify why it insists on transferring billions of pounds in tax revenue to Paris and Berlin. This is a tax whose time has come.